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Pundit’s Pulse Of The Industry:
Westborn Markets, Schnucks, Wal-Mart

Jim Prevor’s Perishable Pundit, November 15, 2006

In response to industry inquiries, we launched a Pundit Pulse series to ascertain the way the spinach crisis is impacting sales at retail. Mira Slott, Special Investigator and Special Projects Editor for the Pundit, went to work.

Special thanks to Bigg’s Director of Produce, Marvin Lyons, for kicking us off. You can read what he had to say right here.

Are sales recovering? How fast? Are other produce items benefiting? What are people doing that works? As always the Pundit expresses great appreciation to those retailers willing to share their experiences with the whole trade.

In today’s Pundit Pulse, we reached to a store-level manager at Westborn Markets in Dearborn, Michigan. Every so often we like to go to the store level where so many things VPs think are happening, don’t happen. In this case we found a problem with outdated store-level signage.

We’ve seen this problem in stores across the country as new signage from headquarters doesn’t filter through in a timely way or as store managers and produce managers improvised to reassure customers. We really appreciate Westborn Markets being willing to stand in front of the industry, mistakes and all, to help us all do better.

To our retail readers: Don’t assume it couldn’t happen in your stores. To association and government readers, note how often our communication efforts don’t reach the levels that they need to:

Ed Adamczyk, Produce Manager, Westborn Markets, Dearborn, Michigan

Q: What is your spinach sales strategy now?

A: Before the outbreak, we were carrying spinach from California, the source of the E. coli problem. We now bring in our spinach from Colorado. We made the decision not to carry any spinach from California.

Q: Why would you stop carrying California spinach now when the FDA gave the OK weeks ago that all fresh spinach is fine to eat?

A: People see the California label and are still scared of it. We switched to Colorado to reassure consumers. We emphasize that it is from Colorado. We have signs and stickers saying it was grown in Colorado. We hang a sign that says Colorado spinach was tested for E. coli by the FDA and nothing was found. We also have a floor sign.

Q: What are the words on this signage exactly?

A: It is based on a notice from CNN.com reporting that the federal government says some spinach is safe to eat. It reads: “the Federal Government says spinach grown outside Salinas Valley, California, is safe to eat.” It continues that Colorado and Washington spinach is also good to eat. Then it goes on to say that bad spinach was suspected in deaths of a Maryland woman and an Idaho toddler. So far 166 cases of illness were reported in 25 states.

Q: That notice is extremely old and no longer accurate. When was that dated?

A: The date I have is 10-3-06. (Editor’s Note: this interview was conducted on November 9, 2006) It’s hanging up above the spinach. Thank you for pointing this out. We’ll need to correct this. There has been much confusion since the E. coli spinach outbreak and we don’t want to add to that.

Q: Have you tried to energize spinach sales with any special promotions of Colorado spinach?

A: No promotions except for the signs.

Q: How have your customers taken to the Colorado spinach?

A: Sales are fair, at 50 percent of what they were last year. We’re still buying the same varieties of spinach, including baby, spring mix with spinach in it, and bulk. And we’re merchandising the same amount in our displays. The most popular is the Aunt Mid’s brand baby spinach in the bag.

Q: Are the missed spinach sales being replaced by additional purchases in other produce categories?

A: Not really. Basically, less people are buying spinach. It hasn’t noticeably increased sales in other categories to off set that loss. Similarly, I haven’t seen much change in the bagged salads without spinach. If anything, sales have declined slightly. …Thank you again for pointing out the problems with our signs.

Following the Pundit’s interview with Ed Adamczyk, Westborn immediately rectified the signage in the department and John Clark, Senior Produce Manager at Westborn, gave us the following information:

“We took the inaccurate signage down after you called. It never should have been up after FDA gave clearance on the California spinach. Posting outdated information was an oversight that has been corrected now. It is true we have been emphasizing spinach grown in Colorado to make our customers feel comfortable. However, as soon as FDA lifted the warnings on California spinach, we made the decision to start carrying Earthbound Farm baby leaf spinach from California, in addition to Aunt Mid’s baby spinach and Aunt Mid’s big curly leaf variety.”

Mike O’Brien, Vice President of Produce and Floral, Schnuck Markets, St. Louis, Missouri

Q: In late September, after you had pulled all spinach off the shelves in line with FDA’s directive, you said it was too early to assess the long-term effect on produce department sales. Much has transpired since that time. Could you give us an update now of how sales are progressing?

A: The good news is that although bagged salads and, in particular, spinach sales are still down, the category is in slow recovery; the line is moving upward.

Q: Could you provide some percentage changes in different categories to give us perspective?

A: We break the bagged salad category into spinach-type products and all the rest. So I can’t say blends are down or kits are up. But when we look at the sales of non-spinach bagged items, that category is still down. The numbers are proprietary.

Q: Are you finding that declines in the bagged salad category are being made up in other areas? For example, are people choosing bulk arugula instead, or substituting other produce items, or maybe just gravitating more toward the canned or frozen aisles?

A: We’ve seen some trade off to bulk greens. Now bulk spinach has slowed down. However, I’d say fresh bulk lettuces in general are healthy. Frozen and canned spinach sales also took a hit after the spinach outbreak and are still down. A lot of consumers left the spinach category completely.

Q: Do you find that surprising since the outbreak only related to fresh spinach items?

A: People are sound-bite-conscious. The majority don’t get the details, and negative news flashes influence shopping decisions.

Q: How does your inventory, product mix and merchandising compare to same time last year? And could that influence sales results?

A: As all good merchants should be doing, our produce managers are not cutting back SKUs or facings. Obviously ordering needs to coincide with consumer demand, but we’re trying to do all we can to get back to normal and sell more produce. We’re carrying the same number of SKUs, continuing our normal space allotment for different product varieties, and we’re keeping our same suppliers, Earthbound Farms and Fresh Express.

Q: Are you running any ads, promotions or marketing campaigns to drive the momentum?

A: We are operating business as normal, promoting bagged salads every week, and occasional promos for spinach specifically, which is what we did before.

We are working with Fresh Express, a good category partner, to jumpstart bagged salads and increase sales in concert with the upcoming holidays. Currently, we are running a customer promotion program through Fresh Express. Customers can register for a winter sweepstakes to win a trip to Hawaii for the Pro Bowl and receive a coupon worth one dollar off any two Fresh Express bagged salads, including blends with or without spinach. We’re trying to build the whole category. We started putting signs up in the store this month, and information about the promotion will run in an upcoming ad.

Q: Some retailers have been posting signs updating consumers on the progress of the spinach outbreak investigation since it began, and trying to allay concerns by advertising FDA reassurances that all fresh spinach is now OK to eat. What approach have you taken here?

A: We’re all about positive marketing, merchandising and promotion. The message we want to convey to consumers is that produce is good. We do not believe putting FDA signage up rehashing the problem helps. All it does is give mixed messages to consumers and creates unnecessary fears. We have to keep the negative news out of the media, out of the produce department and jump on board the PBH program — More Matters — and promote the benefits of eating produce to increase consumption.

We didn’t put signs up announcing, ‘Schnuck Markets is back in the spinach business; spinach is healthy and E. coli-free!’ The best publicity in this regard is no publicity at all. It just draws attention to negative food safety articles. I don’t want E. coli and spinach in the same sentence. I want plenty of healthy signs. That is the most effective strategy.

The best news is that spinach and non-spinach segments in bagged and bulk are on the upswing.

Mike is showing a lot of smarts. He realizes that the reason frozen and canned spinach sales went down when fresh was removed from the shelves was because “People are sound-bite conscious. The majority don’t get the details, and negative news flashes influence shopping decisions.”

As a result he looks to promote in a positive way: “I don’t want E. coli and spinach in the same sentence. I want plenty of healthy signs. That is the most effective strategy”.We are still seeing a lot of signs around the country talking about E. coli — that can’t be good for sales.

The industry should say thanks to retailers like Schnucks: “As all good merchants should be doing, our produce managers are not cutting back SKUs or facings. Obviously ordering needs to coincide with consumer demand, but we’re trying to do all we can to get back to normal and sell more produce. We’re carrying the same number of SKUs, continuing our normal space allotment for different product varieties, and we’re keeping our same suppliers, Earthbound Farms and Fresh Express.”

Sounds like this is a company that really believes words like partnership and marriage so often used with suppliers are not a one-way street. Mike is a man and Schnuks is a company that seems to value relationships. A Pundit cheer for their attitude post-crisis.

Bruce Peterson, Senior Vice President and General Merchandise Manager of Perishables Wal-Mart Stores, Bentonville, Arkansas

Q: How have Wal-Mart’s produce department sales been impacted overall and within particular categories since all the food safety warnings and recalls?

A: Wal-Mart doesn’t give out sales data, however, produce is doing reasonably well. Packaged salads are still under pressure; spinach obviously under a lot of pressure. Bagged salads are recovering a bit, but still influenced by consumer perceptions. The one exception is shredded lettuce. We’ve seen good movement there.

Q: What is the status of bulk produce? Are you noticing a change in purchasing behavior here?

A: There doesn’t seem to be a trade off to bulk produce sales. Iceberg lettuce has been OK. That category was also under the cloud of a recall, but it didn’t seem to impede that product very much. Clearly the problem has been isolated to the packaged salad category and especially those items where consumers perceive spinach in it, regardless if it actually is in there or not.

Q: Some retailers have reported sales declines in canned and frozen spinach items. Has Wal-Mart experienced any up or down shifts in these categories?

A: We saw a drop in canned and frozen spinach as well. Any items remotely related to spinach got impacted.

Q: Have you done any special promotions or marketing programs to energize these impacted categories?

A: Nothing in particular.

Q: What about signage to educate consumers on issues surrounding the spinach crisis?

A: We didn’t do any signage related to the spinach outbreak. We really feel FDA needs to make announcements to the public. They’re the ones that issue warnings and take those warnings off. Any efforts to put out additional signage in the stores just confuses consumers. We don’t go down that road. We always take the position that if any regulatory body issues the warning, we don’t offer the product period, and when it says there’s no more threat we bring the product back.

Q: Do you bring back the product gradually or with full bravado?

A: There’s a problem of carrying the same amount of SKUs if customer demand isn’t there. We reintroduced the spinach category, so it’s back out there in the stores. And as customer confidence builds, we’ll follow the demand with increased supply.

Our experience is the Wal-Mart attitude of gradually reintroducing SKUs as the volume is there to support it is more common than the Schnuck’s method detailed above. Wal-Mart is probably right on a strictly business approach — but there is something of a chicken-and-egg to this situation as large displays of a full range of SKUs are likely to boost consumer confidence.

Here you may be seeing the difference between a publicly held company that has every quarter’s results reflected in its stock price and a family-held business that values its enterprise on a longer-term basis.

Our thanks to Bigg’s, Westborn Markets, Schnucks and Wal-Mart for enlightening the industry on this important subject.

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